Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.

MAR 8.5 Regulated benchmark administrators

Application

MAR 8.5.1R

1This section applies to a regulated benchmark administrator.

Responsibility for benchmark activities: regulated benchmark administrators

MAR 8.5.2R
  1. (1)

    1This rule applies to a regulated benchmark administrator other than:

    1. (a)

      an Annex II benchmark administrator;

    2. (b)

      a PRA-authorised person4.

      2
  2. (2)

    A regulated benchmark administrator must allocate the responsibility described in (3) to a director or senior manager other than a non-executive director.4

  3. (2A)

    In the case of a limited scope SMCR benchmark firm, the director or senior manager in (2) must be sufficiently senior for the function of performing that responsibility to meet the definition of a senior management function.4

  4. (3)

    The responsibility referred to in (2) is responsibility for the firm’s implementation of the applicable requirements of the regulatory system (including the benchmarks regulation) in relation to its activities as a regulated benchmark administrator.

  5. (4)

    A regulated benchmark administrator must promptly notify the FCA of the identity of the person who is allocated the responsibility under (2).

MAR 8.5.3G
12
  1. (1)

    A firm may allocate the responsibility in MAR 8.5.2R to more than one person.4

    2222
  2. (2)

    If the firm does so, it should not divide the responsibility between them. Instead each person should be responsible for all aspects of the role.4

    2
  3. (3)

    For example, the role could be allocated to more than one person:4

    1. (a)

      as part of a job share; or4

    2. (b)

      where departing and incoming senior managers work together temporarily as part of a handover.4

MAR 8.5.3AG
  1. (1)

    4The FCA expects that a person who has the responsibility in MAR 8.5.2R will:

    1. (a)

      be sufficiently senior and credible; and

    2. (b)

      have sufficient resources and authority;

    to be able to exercise their management and oversight responsibilities effectively.

  2. (2)

    One element of a manager’s seniority is the degree to which they can and do make decisions without prior approval and exercise judgment and discretion.

MAR 8.5.4R
  1. (1)

    1This rule applies to an Annex II benchmark administrator.

  2. (2)

    An Annex II benchmark administrator must promptly notify the FCA of the identity of the most senior manager(s) responsible for ensuring that the firm satisfactorily implements the requirements of the benchmarks regulation (in accordance with paragraph 14(a) of Annex II to that regulation).

MAR 8.5.5G
  1. (1)

    1Article 19 of the benchmarks regulation states that Annex II to that regulation applies to the provision of a commodity benchmark instead of Title II to the regulation (save where Annex II is disapplied by article 19).

  2. (2)

    Paragraph 14(a) of Annex II to the benchmarks regulation requires an Annex II benchmark administrator to ensure that it has in place segregated reporting lines amongst its managers, assessors and other employees and from the managers to the administrator’s most senior level management and its board to ensure:

    1. (a)

      that the administrator satisfactorily implements the requirements of the benchmarks regulation; and

    2. (b)

      that responsibilities are clearly defined and do not conflict or cause a perception of conflict.

MAR 8.5.6G

A firm4 may comply with the requirement in MAR 8.5.2R(4) or4 MAR 8.5.4R(2) to notify the FCA of the identity of the manager(s) concerned4 by including that responsibility in that person’s statement of responsibilities.

12

Notifications about suspected benchmark manipulation

MAR 8.5.7G
  1. (1)

    1The guidance in (2) and (3) applies to regulated benchmark administrators other than Annex II benchmark administrators.

  2. (2)

    Article 14(1) of the benchmarks regulation requires a regulated benchmark administrator to establish adequate systems and effective controls to ensure the integrity of input data in order to be able to identify and report to the FCA3 any conduct that may involve manipulation or attempted manipulation of a benchmark, under the Market Abuse Regulation.

  3. (3)

    For the avoidance of doubt, the FCA expects a regulated benchmark administrator to notify the FCA without delay of any notification it receives from a contributor about conduct that may involve manipulation or attempted manipulation of a benchmark under the Market Abuse Regulation.

Adequate financial resources for administrators of critical benchmarks

MAR 8.5.8R

1Notwithstanding any other financial resource requirements that may apply, a regulated benchmark administrator that administers a critical benchmark must:

  1. (1)

    be able to meet its liabilities as they fall due; and

  2. (2)

    maintain, at all times, sufficient financial resources to cover the operating costs of administering the critical benchmark for a period of at least six months.

MAR 8.5.9G

1A regulated benchmark administrator that administers more than one critical benchmark may comply with its financial resources requirements under MAR 8.5.8R(2) by holding sufficient financial resources to cover the combined operating costs for all critical benchmarks it administers.

MAR 8.5.10G
  1. (1)

    1MAR 8.5.8R sets out the minimum amount of financial resources a regulated benchmark administrator must hold to carry out administering a benchmark in relation to a critical benchmark.

  2. (2)

    The FCA expects regulated benchmark administrators administering a critical benchmark to:

    1. (a)

      normally hold sufficient financial resources to cover the operating costs of administering the critical benchmark(s) for a period of nine months; and

    2. (b)

      notify the FCA where a regulated benchmark administrator’s financial resources fall below these levels (required by MAR 8.5.13R and SUP 15.3.11R).

MAR 8.5.11G

1To meet the financial resources requirement in MAR 8.5.8R(2), the FCA expects a regulated benchmark administrator to hold both sufficient liquid financial assets and net capital to cover the operating costs of administering the critical benchmark(s). In particular:

  1. (1)

    net capital can include common stock, retained earnings, disclosed reserves, or other instruments generally classified as common equity tier one capital or additional tier one capital, and may include interim earnings that have been independently verified by an auditor.

  2. (2)

    net capital should be calculated after deductions for:

    1. (a)

      holdings of the regulated benchmark administrator’s own securities or those of any undertakings in the regulated benchmark administrator’s group;

    2. (b)

      any amount owed to the regulated benchmark administrator by an undertaking in its group under any loan or credit arrangement; and

    3. (c)

      any exposure arising under any guarantee, charge or contingent liability.

  3. (3)

    liquid financial assets can include cash or liquid financial instruments held on the balance sheet of the regulated benchmark administrator where the financial instruments:

    1. (a)

      have minimal market and credit risk; and

    2. (b)

      are capable of being liquidated with minimal adverse price effect.

MAR 8.5.12R

1The FCA may use its powers under section 55L of the Act to impose on a regulated benchmark administrator subject to MAR 8.5.8R a requirement to hold additional financial resources to MAR 8.5.8R if the FCA considers that desirable to meet any of its operational objectives.

Notifications for breaches

MAR 8.5.13R

1A regulated benchmark administrator subject to MAR 8.5.8R must notify the FCA, as soon as practicable, where it identifies a reasonable possibility of not being able to hold sufficient financial resources to cover the operating costs of administering the critical benchmark(s) for a period of nine months.

MAR 8.5.14G

1Regulated benchmark administrators are reminded of their obligation under SUP 15.3.11R to notify the FCA of any significant breaches of rules.